Unemployment or out of the labor force: A perspective from time allocation

Abstract

Availability for work and engagement in active job search have been the conventional criteria to distinguish the unemployed from those not in the labor force. In this paper we use the American Time Use Survey 2003–2017 to compare the demographic characteristics, time allocation and transition rates to employment between the unemployed and three subgroups of those not in the labor force — the retired, the disabled, and those not in the labor force but not retired or disabled (the nonretired and nondisabled OLF). We find that although those not in the labor force share the common feature of no time spent on job search, their demographics, time allocation and transition rates to employment expose a drastic divide between the retired or disabled and the rest of nonworkers out of the labor force. Despite differences in time spent on job search, non-retired and non-disabled OLF males share similar demographic characteristics and time allocation patterns as unemployed males and have similar transition rates to employment. By contrast, non-retired and non-disabled OLF females who are married or have children or both show high opportunity costs of substituting search and market activities for child care and nonmarket work. We argue that the conventional job search criterion masks significant heterogeneities within those not in the labor force. We advocate additional alternative measures of labor underutilization that include nonretired and nondisabled OLF males and a subset of nonretired and nondisabled OLF females who are single and without children.